The Target Istanbul Property Project

In the last blog piece we looked at some strategies for making, or rather maximizing profits, under possibly challenging conditions and identified five points for investors to follow. Now, we will apply those principles to an Istanbul investment property that is actually on the market.

To begin with, it should be said that it is believed this investment has the potential to achieve a 20-30 percent return in a year or so, a very good result if accomplished.

Just a few details on this project before we start - 

  • two apartments that can be joined to form a 3-4 Bedroom duplex property with a total internal area of 200 sqm, and an additional 15 sqm of balcony space, or about 7.5 sqm on each floor.
  • fantastic, open Bosphorous view.
  • interior in need of complete renovation.
  • exterior works also need to be undertaken.
  • 5th and 6th floors.
  • there is a functioning lift that also needs to modernized.
  • building entrance and stairwell also need painting and decorating.
  • the property is the ultimate in central location, looking out over Taksim Square on the street side and Bosphorous facing on the other. Siraselviler Street, on the way to Cihangir from Taksim.
  • asking price is 950,000 USD.
one of the best views in istanbul

one of the best views in Istanbul

At first sight, this is a property that many may overlook due to the poor internal appearance of the flats. However, those with an eye for real estate development may see beneath these cosmetic issues and focus on the excellent location, superb views and the fact that there is a lift.Let us do the numbers and see how they come out.

and the other.....

and from the other side…..!

Assuming a final price of 925,000 USD with all costs in (see last blog, POINT 1…buying at the right price) and a generous renovations budget of 125,000 USD, the total investment equals 1.05 million USD, so a re-sale in the vicinity of 1.3 million USD would achieve the desired return.Is this possible? It certainly is and here are a few reasons why:

  • full sea view properties are at the absolute high end of the market in Beyoglu. 10,000 USD/sqm prices have been recorded. However, these would be reserved for buildings with amazing character and prestige, check this out as a prime example of one of the best. Making a discount in this regard, the well-finished product that we would expect after injecting 125,000 USD into building and flat renovations, should get a price in the 6-7K/sqm range, which is well on target.
  • the size of the property puts it in the luxury category. Finding a flat in excess of 200 sqm in the area is quite a challenge, with average sizes much closer to 120 sqm.
  • the lift is a huge factor. Wealthy individuals (the end buyer) may not brook climbing up five floors (the younger legs may, however).
  • the prime location will be attractive to all, particularly foreigners. It also could be used as luxury office space (see POINT 2 in last blog…”the type of property should have a fairly wide appeal).

Now we come to POINT 3 from the last blog:  Be the catalyst for change in the building, and as you are on a schedule to complete your project and achieve your return, possibly take the high ground and put more cash into the building improvements than is your share.

Looks a bit dated and tired

Looks a bit dated and tired

In this case, there are 8 flats in the building, 6 not including the duplex, meaning your share is 25%. Perhaps instead of going the long path with lengthy owner’s meetings etc, cut it short and offer to pay for half of the improvements to the building.  After all, you are looking to close the investment within a year and lengthy discussions on building works are clearly not in your interest.

a scub and TLC and its this!

a scub and TLC and its this!

Again, let us go back to the figures -

The total budget is 120 K USD. 100 K USD should be suficient in completely renewing and redecorating the flats (wholly new electric, water, natural gas, plastering, flooring, re-inforcement of balconies, fully modernized and stylish washrooms and kitchen). This number could obvously go up, depending on the degree of luxury you seek. It could also be brought down lower, but for the purposes of the investment, that would seem to be detrimental. The quality of finish is highly important. Istanbul has become somewhat of a hub for high end design and contemporary chic, so many people are now putting finishes that are on par with those in Manhattan, London, or Paris. Money spent on these flash flats usually gives a good return on the investment. When you are going to sell a high end property, it is better to go a little over the top rather than doing something just acceptable.

-this leaves 25,000 USD for building works, plus an additional 25,000 USd collected from the owners.
With this, you can re-work, clean and repair the clad facade for an estimated 20 K (replacing a new facade won’t cost much more) . The entrance, stairwell and elevator, on estimate, could be repaired, replastered and redecorated for an additional 20 K with ease. This would leave 10 K for contingency. This dated 60′s building could be become a stand out cool property such as The Sanderson in London… without the help of Philipe Starck!

These works could be completed within 6 months or earlier, if you are super-organized and have good luck. That leaves 6 months to sell the property.

That brings us to POINT 5: Price the property appropriately. Remember that the magic number is 30 percent, so do not put an asking price of 1.75 million USD. Instead, a good starting point may be 1.5 million USD. This leaves you room to negotiate and still hit the target.

So, what are you waiting for? Imagine a 200 sqm plus luxury duplex in the absolute heart of a prime area in Istanbul.

Lilimont will offer services from A-Z to assist you in achieving your investment goal in Istanbul.



Developing Property in Istanbul

Buying a property for redevelopment and with an eye for a quick turn around for profit has become much more challenging in most real estate markets, if not worldwide, over the past few years.

But one must believe that opportunities do indeed exist, though perhaps scratching further beneath the surface is required. When real estate markets are on a gradual rather than steep incline, it has to be accepted that value has to be added to the property through renovation works. And these works have to be carried out with a view to whether or not they will provide or enhance the return to be achieved. Take a look at this link for a cracking example of a good re-development 

Most small developers in Istanbul property target somewhere from 20-30 percent return on a project. Those who hold out for more will often be disappointed as a result of their too-high expectations. My feeling is that any project where you feel there is a reasonable prospect of a 20 percent return, with say a ceiling of 30 percent, should be seriously considered. Keep in mind that small projects, such as an istanbul apartment or townhouse renovation, can be completed well within six months. This property was sold a few weeks ago and there’s a great refurbishment planned!

So, what are some of the keys to a successful development project?

1- you must buy at the right price. This may sound too obvious to mention, but if you can pick up a property in Istanbul at market, or even ten percent below, you are well on your way.

Do not hang about!

Do not hang about!

Conversely, you will be stopped in your tracks if you initially over pay. Hunting is required to find such opportunities, and when you have found one, it is best to move quickly, as there are always those seeking properties to flip.

2- the type of property you buy should have a fairly wide appeal. Properties that have a very limited audience will take much longer to liquidate.

Brutalism is great for 0.0001%.

Brutalism is great for 0.0001%.

So, before any purchase is undertaken, you must take into account who will be the end buyer and are there enough end buyers to justify a purchase. It is best to avoid anything too marginal, such as basement properties or properties without sufficient light. Buyers usually shy away from these no matter how tasteful the renovation.

3- If you have bought a property at below market price, there is a good chance that the common areas in the building will be scruffy. It can take 6 months or more to organize painting of stairwells etc, if you are dealing with all individual owners. You will have to organize meetings and collect payments. If you are looking to move your property within six months, this may not be practical. It might be advisable to take on an additional burden, say anywhere up to 50 percent of the costs of painting stairwell, facade, and some other cosmetic works. If you inject 10,000 tl into the works and collect 10,000 tl more from the rest of the owners, you will have plenty of money to make some very positive change in a slightly run-down property. Although it may not seem fair, you have to consider that you are pushing the works in this time frame, and that you are doing it with a profit motive.

For every dollar you put into a building, it seems that you get two in return. It is a very worthwhile thing to consider. Obviously, larger projects, such as installing a lift or structural works should be undertaken with more unanimity amongst the owners.

4- pre-marketing during the renovation stage can be quite useful. This is controversial with some developers who like to have complete control and only fix the pricing after the works are completed. But if you are dispassionate and are just focussing on your target, why not entertain such sales? Amongst the benefits of this are that it may give the buyer an opportunity to customize the finish, it can significantly reduce the time in which your funds are tied up (meaning a higher return), in addition to the fact that buyers often get excited by works in progress, letting thier imagination run with things a bit.

5- It is best not to over price the final product. If you are very confident in your product, and you believe it can achieve that magical number of 30 percent return, then just add a little bit on to the asking price, recognizing that you will have to at least negotiate somewhat.

Also, if you get offers that give you a decent profit, weigh the benefits of holding out for a higher offer. Will a higher offer come through? How long will you have to wait?

Don't hold out too long

Don’t hold out too long

Might it not be better to move on to another project, having achieved success on the current project and having gained experience to help you on your next project?

In the next blog piece, Istanbul real estate with redevelopment potential will be introduced.

But if you cannot wait that long, feel free to email me!!!